Business Basics

[Pages:45]Business Basics

Start-up Information for the Small Business Entrepreneur

Helping Your Business Grow

In Chautauqua County, New York

Office Locations

Jamestown Community College Community Service Center Bldg. Room 252 525 Falconer St. Jamestown, NY 14702-0020

Jamestown Community College North County Training Center Room 108 10807 Bennett Rd. Dunkirk, NY 14048

(716) 665-5754 1-800-522-7232 FAX: (716) 338-1476 Website: jamestown.

The New York State Small Business Development Center (SBDC) is partially funded by the U.S. Small Business Administration. The support given by the U.S. Small Business Administration through such funding does not constitute an expressed or implied endorsement of any of the co-sponsor(s)' or participants' opinions, products, or services.

Table of Contents

Section 1: Starting Your Business Analyzing the Feasibility of Your Business Idea.................................................................1 Initial Cash Requirement for the New Business .................................................................2 Calculating the Break-Even Point......................................................................................3 Do You Have the Right Skills/Personality to Become an Entrepreneur? ..........................4-5

Section 2: What Form of Organization to Use Four Types of Business Organizations ..........................................................................6-7 Quick Reference Guide to Legal Business Formations ...................................................8-9

Section 3: Writing a Business Plan Why Is a Business Plan Essential .....................................................................................10 Structure of a Business Plan .....................................................................................11-12

Section 4: Developing a Marketing Plan Market Analysis .............................................................................................................13 Market Strategy..............................................................................................................13 Market Research ............................................................................................................14 Sample Market Analysis .................................................................................................15

Section 5: Financial Plan Statements Financial Statement Definitions ......................................................................................16 Sources and Uses of Funds.............................................................................................17 Balance Sheet.................................................................................................................18 Income Statement ..........................................................................................................19 Cash Flow Statement......................................................................................................20 Personal Financial Statements ..................................................................................21-22

Section 6: How and Where to Get Capital to Start The Realities of Grants ...................................................................................................23 How to Obtain Your Free Credit Report...........................................................................24 Sources of Financing ......................................................................................................25 What Information Does the Lender Need to Know ...........................................................26

Section 7: Hiring Professionals For Your Team The Accountant, Attorney, Banker and Insurance Agent..................................................27

Section 8: Government Regulations Permits and Licenses......................................................................................................28 Chautauqua County Certificate of Business Name (DBA) .................................................29 NYS Sales Tax Authority .................................................................................................30 Federal Employer Identification Number (EIN) .................................................................31 Employer Responsibilities - Checklist...........................................................................32

Section 9: Essentials of Good Record Keeping Determine Your Record Keeping Needs ..........................................................................33 Cash Receipts Sample Sheets .........................................................................................34 Sales Tax Returns ..........................................................................................................35 Self-Employment Tax.....................................................................................................36

Section 10: SBDC Services Helping Your Business Grow .......................................................................................... 37 Small Business Websites ................................................................................................ 38

Sources of Reference...........................................................................................................41

Section 1: Starting Your Business

Analyzing the Feasibility of Your Business Idea Most businesses start with an idea from someone who believes that they have a new product or service that may be successful. Others develop unique ways to change the business environment of existing ideas or business by making their products, faster, less expensive or in some way better than that of the current competitor's products or services. The business feasibility needs to be tested as well as the individual's ability to develop the idea into a thriving and successful business. Some questions to be considered in the analysis of your business idea:

? What does the product or service do? ? How is it different from other products/services? ? Who will buy it? ? Why will they buy it? ? Where will it be sold? ? When will it be ready to be sold? ? How will it be promoted and sold? The following pages contain tools and exercises that will provide information to help you analyze your business idea. These exercises are intended to help evaluate market feasibility, analyze research costs, determine management capability, assess entrepreneur characteristics and identify goals for the future.

Smart entrepreneurs take the time to plan and evaluate their idea because they understand that it increases their chance of taking a dream and

successfully turning it into reality.

1

Initial Cash Requirement for the New Business

Start-up Dollars Needed

Amount

Description

Advertising

Promotion for opening the business

Beginning inventory

Amount of inventory needed to open

Building construction

The amount per contractor bid and other

Cash

Requirements for the cash register

Deposits

Check with utility and telephone companies

Fixtures and equipment

Use actual bid

Installing fixtures/equipment/furnishings

Use actual bids

Insurance

Bid from insurance agent

Lease payment

Amount to be paid before opening

Licenses and permits

Check with city or state offices

Professional fees

Include CPA, attorney, engineer, etc.

Remodeling/Renovations

The amount per contactor bid and other

Rent

Amount to be paid before opening

Services

Any outside service

Signs

The amount per contractor bid and other

Supplies

Office, cleaning, etc. supplies

Unanticipated expenses

Include an amount for the unexpected

Miscellaneous

TOTAL START-UP DOLLARS

Total amount of costs before opening

REPEATING MONTHLY EXPENSES

Advertising

Bank service charges

Credit card fees

Delivery charges

Dues and subscriptions

Health insurance

* Insurance

Inventory

Amount for expanding and replenishing inventory

* Lease payments

* Loan payments (Principal & Interest)

Office expense

* Payroll other than owner or manager

Payroll taxes

Professional fees

* Rent

This information will

Repairs and maintenance * Salary of owner Supplies

become part of the cash flow projection

(pg. 19)

* Telephone

* Utilities

Miscellaneous

TOTAL REPEATING EXPENSES TOTAL CASH NEEDED AT STARTUP =

STARTUP DOLLARS + ALLOWANCE FOR FIXED COSTS TOTAL CASH NEEDED

(Consider 3 Months of Core Fixed Costs-denoted with *)

2

Calculating the Break-Even Point

The break-even analysis is an important preliminary tool to analyze the feasibility of a business using different price and cost scenarios to pinpoint the sales volume necessary to operate at a profit. It can also be a valuable instrument later as the business develops to measure the advisability of expansion or growth.

The breakeven point is the level of sales at which all expenses are covered resulting in no profit or loss. Sales higher than breakeven will generate a profit; while sales lower than breakeven will generate a loss. To determine the breakeven point, the cost must be divided into (1) variable costs which are costs that vary in direct proportion to a change in sales volume (ex. cost of goods sold), and (2) fixed costs which are costs that are constant regardless of sales volume (ex. loan payments, rent, insurance).

The formula to determine breakeven point is:

X = FC/P-V where

X = annual sales (dollars or units) FC = annual fixed operating expenses P = selling price per unit V = variable cost per unit

EXAMPLE:

Dana's Donuts sell for $5 a dozen. Variable costs are $3.38 per dozen. Fixed costs are $829 a month. We find the companies break-even point by applying the formula.

X = FC/P-V

X = 829

=

829

5 - 3.38

1.62

= 512 dozen in sales

Sales 4500 4000 3500 2500 2000 1500 1000 500

Units -

Break-even = 512 dozen x $5 = $2,560 in sales

Break-even

Profit

Fixed cost Loss 0 100 200 300 400 500 600 700

3

Do You Have the Right Skills/Personality to Become an Entrepreneur?

Entrepreneurial Test

You need to think about why you would like to own your own business. What makes you think you will be successful in business?

For each question, determine the answer that best describes you. You must answer ALL questions for the test to be accurate. Place a check for each question in the column that applies to you.

I'm persistent. When I'm interested in a project, I need less sleep. When there's something I want, I keep my goal clearly in mind. I examine mistakes and I learn from them. I keep New Year's resolutions. I have a strong personal need to succeed. I have new and different ideas. I am adaptable. I am curious. I am intuitive. If something can't be done, I find a way I see problems as challenges. I take chances. I'll gamble on a good idea even if it isn't a sure thing. To learn something new, I explore unfamiliar subjects I can recover from emotional setbacks. I feel sure of myself. I'm a positive person. I experiment with new ways to do things. I'm willing to undergo sacrifices to gain possible long term rewards. I usually do things my own way. I tend to rebel against authority. I often enjoy being alone. I like to be in control. I have a reputation for being stubborn. TOTALS

4

Yes Maybe No

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download